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The structure of Pension System of Ukraine

The pension system reform started in Ukraine after the adoption of Laws of Ukraine “About the compulsory for all State pension insurance” and “About the non-state pension provision”. Now the system of pension provision in Ukraine consists of three levels:

The First level
– a joint system of compulsory state pension insurance. This is the type of state pension provision to which we are accustomed to: working people make contributions to the Pension Fund of Ukraine and pensions to the present pensioners are paid at expense of these contributions. Thereby it is not taken into consideration, which sum of money a present retirees paid as contributions to the Pension Fund during his lifetime.

The Second level
– a cumulative system of compulsory state pension insurance. In correspondence with this system, every worker in a compulsory manner makes the contributions from his salary to an individual pension account in the Accumulated fund. At the expense of this account, on retiring, he will receive payouts, amount of which will depend on the sum of assets, accumulated in personal accounts.  

The Third level – is a system of non-state pension provision according to which citizens and employers voluntarily make contributions in favor of themselves or thirdsmen on individual pension accounts to non-state pension funds. The amount of a pension paid by a non-state pension fund depends on the sum of assets accumulated in individual pension account; inheritance of savings is also provided.  

The first and the second levels of the pension provision system in Ukraine constitute compulsory state pension insurance. The second and the third levels of pension provision system of in Ukraine constitute the cumulative pension provision.

In accordance with the Law “About the non-state pension provision” this type of pension provision in Ukraine are entitled to implement:
Non-state pension funds by concluding pension contracts.

Insurance organizations, but only at the stage of payouts by concluding the lifetime pension insurance contracts.

Banking institutions by concluding the agreements on opening of pension deposit accounts for accumulation of pension savings, but only within the sum determined for the compensation of contributions by the Deposit Guarantee Fund for individuals (currently 5 000 UAH).

There are three types of non-state pension funds:

Public – non-state pension funds, founders of which may be any one or several legal entities (except for institutions, which are financed from the state budget), and participants may be any individuals irrespective to place or nature of their work.

Corporate
– non-state pension funds, founders of which may be legal entities-employers and employers-payers may join to them. Participants of such funds may be only individuals who are (were) in labour relations with employers-founders and employers-payers of this fund.  

Professional
– non-state pension funds, founders of which may be unions of legal entities-employers, unions of individuals, including trade unions (unions of trade unions), or individuals, related by nature of their professional activities. Participants of such fund may be only individuals, related by professional activity determined in the fund’s charter.



© 2008 All-ukrainian administrator of pension funds